Wishard v. United States

• Citation: 143 F.2d 704
• Decision Date: 10 July 1944
• Docket Number: No. 8456.,8456.
• Parties: WISHARD v. UNITED STATES.
• Court: U.S. Court of Appeals — Seventh Circuit

143 F.2d 704 (1944)

WISHARD v. UNITED STATES.

No. 8456.

Circuit Court of Appeals, Seventh Circuit.

July 10, 1944.

Samuel O. Clark, Jr., Asst. Atty. Gen., Sewall Key, Homer R. Miller, and Helen R. Carloss, Sp. Asst. Attys. Gen., all of Washington, D. C., and B. Howard Caughran, U. S. Atty., of Indianapolis, Ind., for appellant.

Robert D. Armstrong, and James W. Noel, both of Indianapolis, Ind., for appellee.

Before EVANS, MAJOR, and KERNER, Circuit Judges.

KERNER, Circuit Judge.

Plaintiff filed a timely claim for refund of federal estate taxes which the Commissioner rejected. He thereupon brought suit and judgment was entered in his favor. To reverse this judgment, defendant appeals.

On April 30, 1931, William Niles Wishard, then aged 79, purchased for a single premium cash payment of $26,250 an annuity contract which provided for a monthly annuity payment of $72.92, payable and paid to him, as provided therein, until February 20, 1934. On that date, at Wishard's request, the policy was rewritten. According to the revision, the annuity was thereafter to be paid, and was paid, $32.92 each month to his wife and $40 each month to his sister. Specific provisions were included to designate the beneficiaries who were to get the income in the event that his wife or his sister should not be living. The specific details of these provisions are not important.

Special Provision B, one of the options of settlement of the death benefits, related to the payment of interest on the funds after Wishard's death. The rights of the wife to draw on the principal were set out and the contingencies provided for under which certain designated beneficiaries might be entitled to draw the balance of principal and interest not already withdrawn. Under some contingencies the entire fund was payable at Wishard's death. Under others it remained in the insurance company, the interest and parts of the principal being paid under specified conditions.

The most significant part of the revision of February 20, 1934, was that Wishard gave up the right to change the beneficiaries and to elect one of several modes of settlement of the death refunds, and thereafter neither he nor the beneficiaries had the right to cash, assign or pledge the contract. He retained no incident of ownership or control whatsoever. None of the minimum refund could at any time under any contingency revert to him or to his estate, but all unexhausted portions of the minimum refund could be paid only to the executor, administrator or personal representative of the last to survive of any beneficiary of the policy. Hence Wishard had no right, title, or interest in or control over the policy or the proceeds thereof after February 20, 1934.

Wishard died on January 22, 1941. He was survived by his widow, two sons, and sister. The minimum death benefits under the contract, due at his death, including dividends, totalled $25,124, so that if plaintiff's position is sound, he is entitled to recover $3,156.88.

The Commissioner included $25,124 in Wishard's gross estate on the theory that the transfers were taxable under the provisions of Section 811(c) of the Internal Revenue Code, 26 U.S.C.A. Int.Rev.Code, § 811(c).¹

Defendant's principal contention is that this transfer of February, 1934, was a transfer in contemplation of death because there is no substantial evidence showing that the dominant motive for the transfer was associated with life, and defendant correctly asserts that the burden of proving that this was not a transfer made in contemplation of death was on the plaintiff, even though the transfer occurred more than two years before decedent's death. Smails v. O'Malley, 8 Cir., 127 F.2d 410; Oliver v. Bell, 3 Cir., 103 F.2d 760. By finding that the transfer was not made in contemplation of death, the trial court held that plaintiff had sustained this burden. Because of this holding, the evidence and the inferences to be drawn therefrom must be viewed in the light most favorable to the plaintiff.

The undisputed evidence shows that at the time of the transfer and for several years before and after, Dr. Wishard was a specialist who practiced his profession with three other doctors and operated a clinic in Indianapolis. He was a member of the staff of City Hospital in Indianapolis, supervised and frequently visited a clinic in the hospital, and was also on the staff of the medical school at City Hospital. Moreover, he was a member of the Advisory Council of the Methodist Hospital, chairman of the committee on professional standards, and visited patients at the hospital up to the last year before his death. From 1932 to 1934 he frequently visited his bank, purchasing bonds and stating to his banker that he was interested in the purchase of long term securities. He never made any statements to his banker about dying. From 1932 to 1940 he attended meetings of the State Medical Association with regularity, being chairman of its bureau of publicity. He delivered several addresses from 1933 to 1938, his practice being to dictate them to his secretary, following which he committed them to memory and delivered the addresses without notes. He traveled quite often; in 1937 he made a trip to New York and to the West Coast with his wife. It was only when, on rare occasions, he had a bad cold or was extremely tired that he was absent from his work for brief periods. Witness after witness gave testimony which supported the conclusion that for a man of his years Wishard was an extraordinary person, remarkably active and alert both mentally and physically.

Wishard's will was not executed until September, 1940, over six years after the transfer. Furthermore, the will's provisions were far from identical to those of the annuity policy. Although both his wife and sister benefited by both, the sister benefited proportionately far more by the annuity than by the will. It would seem perfectly natural that his wife, his children, and his sister would be the objects of his bounty whether the transfer was actuated by a life motive or in contemplation of death.

Less than thirty per cent of the decedent's estate, as valued at the time of his death, was transferred by the change in the policy. Near the turn of the century the decedent had taken out life insurance policies in favor of his wife and sister. Hence the annuity policy could not be said to be designed to serve merely as ordinary insurance. On the contrary, it was presently operative during his lifetime.

Both sides concede that the leading case to be considered is United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867, in which the Supreme Court stated:

"As the transfer may otherwise have all the indicia of a valid gift inter vivos, the differentiating factor must be found in the transferor's motive. Death must be `contemplated,' that is the motive which induces the transfer must be of the sort which leads to testamentary disposition. As a condition of body or mind that naturally gives rise to the feeling that death is near, that the donor is about to reach the moment of inevitable surrender of ownership, is most likely to prompt such a disposition to those who are deemed to be the proper objects of his bounty, the evidence of the existence or non-existence of such a condition at the time of the gift is obviously of great importance in determining whether it is made in contemplation of death." 283 U.S. at page 117, 51 S.Ct. at page 451, 75 L.Ed. 867.

"It is apparent that there can be no precise delimitation of the transactions embraced within the conception of transfers in `contemplation of death,' * * *. There is no escape from the necessity of carefully scrutinizing the circumstances of each case to detect the dominant motive of the donor in the light of his bodily and mental condition, and thus to give effect to the manifest purpose of the statute." 283 U.S. at page 119, 51 S.Ct. at page 452, 75 L.Ed. 867.

Section 81.16 of Treasury Regulations 105 contains the same test.²

Certainly decedent's physical and mental condition was excellent. Even if we should adopt defendant's contention that we should exclude as unsupported by evidence the court's findings that decedent's father was a physician in active practice until his ninety-fourth year, that the family history was one of long life, and that decedent died after an illness of six days from a coronary occlusion resulting in cardiac failure followed by terminal pneumonia, there is adequate evidence to show that decedent was not in any fear of death at the time of the transfer. The court's finding that on February 20, 1934, at the time of the revision of the policy, the decedent was possessed of unusual vigor is well supported by evidence. Decedent's bodily condition was in no way impaired until just prior to his death in 1941.

The task of reconstructing a dead man's motive in making a transfer seven years before his death is a difficult one. But there is no evidence here to show that the transfer was made in contemplation of death. True, decedent was 82 years of age when the transfer was made. But it is well settled that advanced age of itself is not the decisive test in determining whether contemplation of death was the principal motivating cause of a transfer. United States v. Wells, 283 U.S. 102, 51 S.Ct. 446, 75 L.Ed. 867; Heiner v. Donnan, 3 Cir., 61 F.2d 113; Kaufman v. Reinecke, 7 Cir., 68 F.2d 642; Nevin, Ex'r of John Wanamaker Estate v. Commissioner, 16 B. T. A. 15; Charlotte C. Lozier Estate v. Commissioner, 7 B. T. A. 1050; Edward Moore Estate v. Commissioner, 21 B. T.A. 279. Nor does the mere fact that Special Provision B, in connection with defining contingencies under which the rights of the beneficiaries to share in the proceeds of the policy come into existence, refers to the decedent's death seven times necessitate the conclusion that contemplation of death induced the transfer. This shows merely that general apprehension of death of which ...